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Management and Organizational Studies
Management and Organizational Studies 1021A/B
Kevin Thompson

MOS 1021- MARKETING 2013 CHAPTER 1- MARKETING FUNDAMENTALS ESSENCE OF MARKETING  Main objective of marketing is to drive profits or generate revenue and support to fund programs and run operations  Only one aspect revolves around promotion  Focusing on customer needs o Essence of successful marketing is focusing on customer needs and developing programs that delight consumers and encourage customer loyalty o Consumers do not always know what they want o Challenge is to identify needs and understand how they can be best met o Digital world helps online gathering of information but challenge marketers to understand new biases o General insights about consumer needs  Initial point of contact for consumers is often online on a company website- expecting it to be available to check product offerings and company information  Consumers must be able to find website through search engines therefore websites must be written so search engines find them when consumers conduct online searches  They’re impatient and therefore website must load quickly and designed to provide content within two or three clicks  Consumers widen online search through social networks, blogs, product review sites and personal contacts therefore having positive presence on social media sites is important communication tool for marketers who increasingly engage in social media  84% of Fortune 100 companies now post on FB status updates o Travel industry is example of where marketers spent time to understand consumers’ online needs and developed new approaches to remain relevant  Creating customer value o Developing customer loyalty provide customer value in 2 ways  Companies create products that provide customers with goods/services that have added value vs. competitive offerings  Reward customers for loyalty through marketing programs that focus on repeat purchases and incentives to encourage future purchases o Customer value: the unique combination of benefits received by targeted buyers that includes quality, price, convenience, delivery and bother before-sale and after-sale services o Work diligently so that value is obvious to consumers o Ongoing marketing programs encourage consumers to become long-term customers and spread word to other o Creating products with added value is achieved by  Product design  Pricing strategies  Service elements  Appealing to target markets o With limited funds it is better to channel resources towards consumers who are most interested in purchasing a product o Target market: specific group of existing and potential consumers to which marketers direct their marketing efforts o Geared to appeal to product’s specific target market, ensuring each element of marketing mix appeals to characteristics of target market  Coordinating the marketing mix o Marketing mix: 4 P’s  Product: attributes that make up a good, a service or an idea, including product design, features, colour, packaging, warranty and service levels  Price: expected regular retail or sale price for a product  Place: distribution channels, retail formats and merchandising used to sell a product  Promotion: communication tools needed to inform consumers about a product, including advertising, public relations, sales promotion, direct response, event marketing and sponsorship and personal selling o Need to be well coordinated and appeal to distinct characteristics of target market o Marketers need to understand element of marketing mix are what makes consumers tick  Clarified by market research and metrics on consumer behavior help determine how marketing efforts can be designed/modified to meet needs and deliver profits or support for company o Marketers include all elements in brand’s annual marketing plan where details for each element of marketing mix are outlined with required budgets and profit and loss statements for brand o Overtime, marketers are able to identify purchase motivation that goes into behavioural and psychological motivation which is important for many purchases o Internet has complicated things causing markers to carefully monitor this environment and polit4ely engage with consumers to help create positive space for products MARKETING PROCESS  Marketing process o Identifying consumer needs o Managing the marketing mix to meet these needs o Realizing profits  Marketers constantly evaluate program success, implementing and recommending changes to strengthen efforts  Marketers are ultimately responsible for generating company profits and marketing programs are designed for this purpose  Marketing: the process of planning and managing goods, services, and ideas to meet consumer needs and organizational objectives. It includes conception of these products and the pricing, promotion and distribution programs designed to make a profit and generate revenue or support for an organization  Objectives of buyer and sellers must be met for exchanges to occur and for profits to be realized  Exchange: the trade of things of value between buyers and sellers so that each benefits o Three-way exchange between website provider, the visitor to the website and the advertiser  What can be marketed o Product: good, service or idea  All can be marketed to encourage people to buy or support  Good: a product you can touch and own  Service: product that is intangible that you cannot touch  Idea: a concept that typically looks for support o Many successful marketers launch products with layers of goods, services and ideas to connect with consumers  What is a market o Market: potential consumers with both willingness and ability to buy o Sometimes market, target market and consumers are different groups of people and marketers need to decide a balance  Market is who pays  Target market is combination of who has influence over decision to buy  Consumers is who uses product EVOLUTION OF BUSINESS PHILOSOPHIES  Up until 1930s, businesses were in production orientation stage o Production orientation: focusing organizational efforts on the manufacture of goods o Manufactured goods tended to sell regardless of quality because they were in short supply  1930s to 1960s o Sales orientation: focusing organizational efforts on selling as many products as possible o Market become more competitive, production more efficient and products were in abundance o Companies started to hard-sell to make profit, and consumer needs were still not major consideration  After 1960s o Marketing orientation became focus of businesses o Marketing orientation: idea that an organization should strive to satisfy needs of consumers while also trying to achieve organizational goals o Marketing concept: the idea that an organization should strive to satisfy needs of consumers while also trying to achieve organizational goals o Organization with marketing orientation focuses efforts on continuously collecting info about customers’ needs, sharing info across departments and using it to create customer value  After 1990s o Relationship marketing has included greater use of social media and increase focus on customer relationship management and corporate social responsibility to create meaningful relationships o Relationship marketing sees organizations considering lifetime value of customers and striving to offer better services, high-quality products and meaningful long-term relationships o Formally Relationship marketing: when organizations create long-term links with customers, employees, suppliers and other partners to increase loyalty and customer retention o Emphasize customer retention and ongoing customer satisfaction rather than short-term transactions o Improved customer relationships can result in increased customer loyalty, improved customer retention levels o Improved customer relationships can result in increased customer loyalty, improved customer retention levels and greater profits for an organization o Relationship marketing involves personal, ongoing relationship between an organization and its customers that often starts before sale occurs and lasts well beyond the point when sale has concluded o Social media, database technology and increased importance of corporate social responsibility all point toward creating meaningful relationships with customers to drive business success  Social media provides consumers with ability to interact with marketing messages by posting comments visible to all encouraging companies to be more transparent and interactive in communications  Social media: form of online media that allows members to create own network of friends and contacts to share comments, videos and images as form of self-expression  4 ways to use social media o Engage and connect with consumers o Monitor real-time consumer engagement and brand buzz and provide customer service o Measure impact of specific promotional programs o Identify informal brand advocates that can spread positive messages about a brand  Typically, marketers seek brand fans with influential social networks and send them brand updates and info they may find useful  Database technology facilitates relationship marketing by putting focus on customer relationship management (CRM)  Formally CRM: overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction  Approach rooted in knowledge that it is less expensive to service and maintain current customers than new ones  CRM identifies firm’s most-valued customers and builds loyalty programs to appeal to their needs  Systematically identifies what leads to customer satisfaction and profitable brand loyalty  CRM involves occasional customer phone call on upcoming events or in advanced state, includes sophisticated customer loyalty programs that reward continued purchases and usages  Retailers use CRM loyalty programs to help secure greater share-of-wallet (dollars purchased) from customers o Loyalty cards to track individual purchases and then correlate data with best offers/incentives o Offers then customized to meet purchase habits of people with similar buying preferences  Advanced CRM considers value of specific customers over their lifetime and what offers most suited to their stage of life  Retailers can use customer purchase data to analyze departmental purchases to improve store design and max profitability  Corporate social responsibility (CSR) is important part of relationship marketing stage that consumers want to be associated with companies that share their values and interests  CSR: concept when organizations voluntarily consider well-being of society by taking responsibility for how their businesses impact consumers, customers, suppliers, employees, shareholders, communities, the environment, and society in general  CSR programs become part of brand’s fabric and help build long-term relationship and solidify brand connections with consumers  CSR initiatives has 3 approaches o Sponsorship and spearheading of community programs o Sponsorship and involvement in fundraising initiatives for charitable organizations o Used as business philosophy that permeates an organization that implements socially responsible business practices to positively impact community at large o Most sophisticated level, exec compensation is linked in part to CSR results  Marketing community is also putting an increased focus on well-being of society and the environment  Commonplace to now see marketing programs include a component that addresses need; described as societal marketing concept  Societal marketing concept: marketing programs that focus on consumer and well-being of society NEW AND EVOLVING MARKETING PRACTICES  Focus on generating immediate profits and also long-term viability of its business, meaningful customer relationships and community initiatives  Digital marketing o Widespread use of technology is most important trend impacting how marketers go to business o Digital technology drives how consumers gather info, want to be entertained and purchase products o When consumers first look for product info, website is first point of contact followed by online search o Poor service, substandard products or unethical practices can quickly surface in searches and negatively impact product sales o Consumers between 18 to 34 spend most of media time on internet o Younger demographics (2-17) are spending less time on internet than previous years probably due to cellphones compared to those 55+ who are spending more time on the internet than previous years o Marketers shifted online advertising dollars away from email and business and finance sites onto social networks o Consumers expected to continue love for mobile devices and increasingly use them to access online content o Mobile apps which allow shoppers to easily interact with brands and check prices will push marketing dollars into mobile marketing arena o Digital marketing includes many stellar online tools such as display advertising, affiliate marketing, search engine marketing, pay per-click advertising o Marketers must have clear understanding of how consumers navigate digital world and how it relates to non-digital offline interactions and behaviours  Experiential marketing creating opportunities for consumers to directly interact with brands o Rather than rely on mass media, they focus on creating an occasion for few consumers to interact personally with it and spread word to others o Builds awareness and generates word-of-mouth buzz; brand goes from passive to actively interacting o Can follow number of approaches often combining public relations, event marketing and promotions to break through clutter  Partnership marketing: creation of formal associations between brands that will result in incremental business for both brands that could not have been achieved separately o Purpose is to drive incremental business and strong return on investment o Challenge lies in finding appropriate partners, setting realistic goals, tracking results and aligning partnership goals with business objectives o Takes many forms, permeates different platforms and exists online and offline o Partnership can be  Simple promotional partnerships (simple short-term promotional offers between brands)  Strategic alliances: long-term strategic alliances between companies with similar values and marketing objectives that extend beyond short-term promotional offers into long-term formal business agreements  Metrics: measures and monitors business performance through collection and usage of data used to evaluate marketing programs o Canadian-business world is performance-based culture that use metrics to improve programs and deliver better results o Generally classified as either  Routine metrics  Measured against marketing plan targets and look at elements such as sales, market share, profit margins and profit levels  Program-specific metrics  Analyze specific marketing programs and measure performance against benchmarks and targets o Digital technology increased emphasis on metrics which are quick, easy and affordable in online environment  Allows marketers to measure online sales and drill down to origin of sale and when consumers may have opted in or opted out of purchase funnel  Online measurement tools can measure website interactions  Data can be meshed with cost information to deliver actionable analyses on costs-per click  Marketers are challenged to sift through deluge of online metrics and use info to understand how to build bette4r relationships with consumers  A focus on ethics o This orientation requires a long-term financial investment from an organization and a genuine commitment from employees o In Canada, regulations are put in place to safeguard people, communities and environment from businesses that don’t have their well-being mind o The Copyright Modernization Act proposes that consumers be permitted to make one copy per device of digital download o Consumer groups exert pressure on government bodies to protect society o Canadian Marketing Association is professional body for marketing industry  Responds to legislative issues and sets guidelines on areas such as business practices, ethics and privacy policy  Dealt with policy issues concerning telemarketing fraud, electronic commerce and privacy  Has code of ethics with which all members must comply to encourage ethical and legal marketing MARKETING CAREERS  Starting point is to get education and create network of business professionals to contact upon graduation  Entry-levels exist in sales, marketing and promotions in variety of fields o Usually include on-the-job training, creation of analytical reports, liaison with other departments, and potential to move up within organization  Opportunities can be found in the private sector, non-profit sector and government o Private sector: required in consumer marketing and in business-to-business marketing  Students who are bilingual have advantage and can be leveraged with companies dealing in foreign groups o Companies often seek language skills  Students need to be analytical, be able to work with others, capable of working in teams and communication skills in both verbal and written contexts  Need to keep fingers on pulse of consumer  Need to stay current, intellectually curious, and involved in conversation of life  Often spend part of careers working in sales or promotional roles before moving into marketing  Emphasize importance of having a passion for what you do, thriving in a fast-paced environment, having solid communication skills and solid understanding of current trends CHAPTER 2: THE MARKETING ENVIRONMENT  Successful marketing programs reach out ad address changes in marketplace while touching areas of increasing interest  Product development considered industry regulations, competitive offerings to determine whether new business opportunities exited and whether there’s room to improve marketing approaches  Marketers constantly monitor marketing environment incase of new opportunities or potential threats MARKETING ENVIRONMENTAL SCAN  A marketing environmental scan: process of continually acquiring information on events occurring outside an organization to identify trends and pinpoint opportunities and threats to a business o Uses this as stepping stone for SWOT analysis (Strengths, weakness, opportunities, threats)  SWOT analysis: assessing how well a company is serving its business and target consumers by assessing an organization’s internal strengths and weaknesses as well as its external opportunities and threats o Information is used to set future direction for business and lay groundwork for competitive marketing programs that bring revenue into company o Marketing environmental scan helps markets identify what changes affect their consumers: regulatory forces, demographic forces, socio-cultural forces, competitive forces, economic forces, technological forces  Demographic forces o Demographics: the statistical data on a population according to characteristics such as gender, age, ethnicity, income, education and occupation o Important to clearly understand changes that are occurring in demographical arena to ensure marketing efforts are well placed and opportunities are not-overlooked o Census of Canada occurs every 5 years and data will be published in batches over the subsequent two years o An aging population  2006 census shows 11.7% of population are between 55 and 64  Higher proportion of seniors with different needs for goods and services  People over 50 control 75% of net worth of Canadian Households  Marketers are rising to occasion and addressing greying market with new products and services geared to target group  Research shows greying population in Canada more likely to spend resources on travel, electronics and channel funds toward health-related products o Diverse Generations  4 main generational groups of consumers: baby boomers, Generation X, Generation Y (also known as Millennials) and Generation Z (the Net Generation)  Baby boomers: generation born between 1946 and 1964 o Main reason for greying of North America o Accounts for 60% of expenditures on consumer goods and services o Keen interest in self-image, health and retirement o Increasingly using technology to communicate with others and research products  Generation X: born between 1965-1974 o 12% of population o not brand loyal and tend to be self-reliant, entrepreneurial and better educated o less prone to materialism and extravagance o becoming key influence in market  Generation Y: 1975-1991 o Mostly children of baby boomers and referred to as echo boom or millennials o 27.5% of population o key products: music, video games, sports, compute purchases o expected to become as influential as baby-boom parents  Generation Z: after 1992 o Grown up with internet, and considered most disruptive o Avid uses of social media, not very brand loyal and very objective in purchases o Discoverers and creators of content they readily critique and share with others  Each generation has different tastes, consumption patterns and attitudes; each using media differently o Big City Dwelling  Canada is one of most urbanized countries  Cities growing much faster than rural areas which lag behind rest of country in growth rates  Canadian cities not vast metropolitan areas, and are only 6 areas: Toronto, Montreal, Vancouver, Ottawa-Gatineau, Calgary and Edmonton  Biggest cities are growing more slowly than suburbs o Ethnic Diversity  2/3 of nations growth between 2001 and 2006 was due to immigration  Most coming from Asia  Other than English and French, top languages used were Chinese languages and Punjabi  Visible minorities make up 50% of population in large urban areas  Specific ethnic groups have particular interests and habits o World market  World population showing growth in underdeveloped areas  Areas represent future opportunities for expanding  Sheer size presents opportunity to sell products and services which is becoming increasingly easy due to global appeal of internet o Non-Traditional Families  Traditional nuclear families consist of 2 parents and 2 children  More common-law relationships, single-parent families, blended families and same-sex marriage  Socio-cultural forces: cultural values, ideas, and attitudes as well as society’s morals and beliefs o Hard to track but can be tracked by keen eye and good intuition, observation and consumer research o Canadians are known to be o Trustworthy, family oriented, worldly organized, reliable, socially conscious and conservative o Marketers are responding to socio-cultural changes as they relate to media usage, food consumption, health and fitness, the environment and modification of gender roles in society o Media usage  Consumers have taking reins of communication channel, choosing how, if and when to listen to marketing messages  Influencing how consumers interact with each other, gather information and stay informed  Multiplatform media landscape is resulting in socio-cultural changes that see consumers in control of a diverse set of tools to access media and communicate with each other  Consumers more elusive and difficult to reach  Marketers respond with integrated marketing communications approaches that use wide array of communication tools to engage target markets  Online platforms became one of the building blocks of communication campaigns using carefully designed microsites, online ads and creative social media tactics to engage consumers  Email blasts to databases of interested consumers may be part of mix, used to communicate one-on-one with consumers and point toward websites or retail outlets for special offers  Social media gives consumers easy-to-use public voice that keeps organizations on alert  Consumers vocally express opinions for all to see  Consumers can influence how products and marketing approaches are received and therefore target messages toward these influential social media advocates o Food consumption  People will continue to demand high-quality foods that balance good taste with nutrition and convenience  Also demand fresh, nutritious foods that offer good value and choice  Ethnic foods will continue to infiltrate Canadian palate with Asian and South American influences giving rise to blending cuisines, new dishes, novel ingredients and unexpected food presentation  Consumers in Canada exposed to wide variety of international meals from friends, families, restaurants and multicultural communities  Marketers develop products geared towards evolving palates  People shifting food expenditures away from raw ingredients toward pre-prepared foods  Replacing traditional mealtimes with snacking occasions and consuming more and more meals on-the-go  Meatless-meals, organic offerings, local produce, small indulgent gourmet brands expected to exhibit increase  Food safety and health-related food issues are expected to pepper media focusing consumers on this all-important area o Health and Fitness  Increased focus on healthy living encouraging people to eat healthy and stay active and fit  Companies responding with healthier products and new ideas that address concerns around obesity and associated with medical conditions  Resulting in host of healthier food choices; even junk food brands trying to address health concerns by introducing smaller proportions and lower calorie offerings  Canadian Children’s Food and Beverage Advertising Initiative (CAI) introduced in 2007  Voluntarily created by 19 of Canada’s largest food and beverage companies to restrict children’s advertising messages to healthy choices o Environmental Awareness  Canadians showing less wasteful, recycling, and making choices that don’t negatively impact the environment  Many companies rally around cause, genuinely managing business practices to reduce wast4 and provide customers with environmentally friendly products  Attitudes to green products waver over time and can vary from highly engaged to moderately  Consumers often balance green living with more wasteful purchases and buy high-profile green products such as hybrid or electric cars to make public statements about their beliefs, purchasing less environmentally friendly products in less public circumstances  Sometime companies are green-washing: a term used to describe those that paint themselves environmentally friendly just to market more products and gain positive publicity o Evolving gender roles  More women working full-time and men are becoming involved with housework  Dual-income families becoming time-starved  Marketers identified opportunities to address issue with more convenience products and better services to help busy families  Companies offering flexible hours for employees and continued growth of home office  Economic Forces o Economy: the collective income, expenditures, and resources that affect the cost of running a business or a household o Economic ability of a consumer to purchase a product is what interests marketers o When economy slows down and people do not feel secure in jobs, higher-priced purchase delayed o In economic downturn, automotive sector is one of first industries to suffer o Marketers need to recognize how the economy affects purchase behavior of specific target groups o Some products do better in poor economy o Economy consists of macroeconomic forces and microeconomic forces  Macroeconomic forces: the state of a country’s economy as a whole as indicated by its growth rates, inflation rates, unemployment rates and consumer confidence indexes  Inflation: a period when the cost to produce and buy products and services gets higher as price rises  Recession: a time of slow economic activity with two consecutive periods of negative growth o Consumers tend to focus their spending on life’s necessities  Canada’s growth described by Organization for Economic Co-operation and Development (OECD) as relatively strong due to its strength in productivity, investment levels, CAD dollar and technological advances  Marketers keep appraised of a country’s key economic indicators to have clear understanding of whether to expect downturn or upswing in economy o Then couple info with anticipated business performance and adjust marketing programs to max business results  Microeconomic forces: the supply and demand of goods and services and how this is impacted by individual, household, and company decisions to purchase  Gross income: total amount of money made in one year by a person, household, or family unit including taxes  Disposable income: balance of income left after paying taxes; income that is used for spending and savings  Discretionary income: money that consumers have left after paying taxes and buying necessities  Technological Forces: inventions from science or engineering research o Each new wave of technology can replace existing products o Companies need to be aware of technological changes to ensure product doesn’t become obsolete o 40% of Canadians are very comfortable with latest communication technology  View internet as source of exploration, gaming and entertainment o 74% computers and 83% internet are essential tools today o Computers are screen of choice for going online o Cloud computing: ability to assess and use programs on internet without owning software  Will raise issues related to website reliability, security, privacy and content ownership o Free internet content will evolve with premium media brands charging for online content in an effort to generate revenue o How technological advances changed how consumers conduct daily lives  Internet and search engines replying bricks-and-mortar libraries as instant sources of info  Email, texting messaging and instant messaging are reducing need for traditional mail delivery systems  Social networking sites are surfacing as new virtual meeting places  Video-sharing sites allowing people to create and share own video-content  Music and video downloads replacing traditional music and DVD retailers  Blogs allowing people to create own content and voice opinions  High-speed internet connections facilitating viewing of TV online  Cellphones replacing land-line phones  Computer tablets and ereaders encouraging consumers to read books, magazines online  Competitive Forces: alternative products that can satisfy and specific market’s needs o Must consider competitors when designing marketing strategy o Large organizations tend to research data from companies to obtain competitive market share data and identify general industry trends or market growth patterns o Smaller companies may rely on competitive info gleaned from sales people, online research o One of marketer’s primary concerns is monitor competitive activity of products that compete head-to- head with its brands  Direct competitors: similar products sold in same category  Indirect competitors: products competing for same buying dollar in slightly different but related category o Marketers need to be familiar with competitive products and try to anticipate competitor’s moves o Need to have clear understanding of competitive nature of industry in which they function and factor this into a marketing environmental scan o Competition spectrum  Monopoly: when only one company sells in a particular market  Legal in Canada but are carefully monitored by Competition Bureau to ensure consumers not charged excessive prices  Governments don’t like them and actively seek to reduce control of market through regulation and encouraging competition  Oligopoly: type of competition that occurs when a few companies control a market  Canada: situation only exists with oil companies that control gasoline industry  Can easily control price because of limited competition and criticized for price collusion (fixing prices among competitors)  Marketers who function in oligopoly need to be acutely aware of competitive moves and particularly changes in price  Monopolistic competition: type of competition where a large number of sellers compete with each other, offering customers similar or substitute products  Need to know that branding plays important role as does product differentiation and added-value activities to draw consumers to product  Being in touch with consumer needs and adjusting marketing mix to meet needs is crucial for long-term survival  Perfect competition: type of competition where there are many sellers with nearly identical products and little differentiation  Marketers need to know pricing plays key role in securing business and focus will be cost reduction in every element of business  Regulatory Forces o Regulations: restrictions placed on marketing practices by government and industry associations o Placed to protect consumers from unscrupulous business practices, set acceptable standards of practice and encourage fair competition o Marketers need to understand all legal and ethical guidelines that affect their business practices and retain legal guidance as needed to ensure that practices are legal o Key groups that regulate marketing practices in Canada  Competition bureau  Responsible for administration and enforcement of Competition Act, Consumer Packaging and Labeling act, Textile Labeling Act and Previous Metals Marketing Act  Promote and maintain fair competition and curtail false and misleading representations to sell products  Prohibited practices including bait-and-switch advertising (advertising a low-priced product to lure consumers into store but not having in stock resulting in costumers buying more expensive products)  Failure to follow laws can result in jail time or fines  Has legal clout to levy hefty fines on individuals or companies o Max $1 mil for individual and $15 mil or corporations  Advertising standards Canada (ASC)  Self-regulatory non-government association which runs by advertising, media, and marketing professionals with purpose of setting and regulating standards of professional practice in advertising industry  Industry agreed to abide by its leadership, code, process and rulings  Sets and regulates advertising guidelines, monitored through consumer complaint process  Provides advice and pre-clearance service for advertisers  Does not carry into legal arena  Relies on industries compliance with the Code which covers 14 areas  Canadian radio television and Telecommunications Commission (CRTC)  Government agency that sets guidelines and enforces clear set of regulations on Canadian businesses  Administers Broadcasting Act and telecommunications Act setting guidelines for broadcast standards  Adjudicates on ownership of media companies to ensure monopolies don’t exist and approves broadcast licenses for TV and radio stations  Oversees advertising of alcoholic beverages and works with ASC on issues related to advertising to children  Do Not Call List (DNCL): given customers ability to not receive telemarketing calls on cellphones, landline phones and fax machines by registering numbers of communication devices o Exemptions to DNCL: registered charities, newspaper subscriptions, political candidates, market-research companies, companies which business have been conducted in last 18 months o Failure to comply fines up to $1500 for individuals and $15000 for corporations  Currently restricts TV advertising o 12 minutes per hour on specialty channels o No advertising on pay-television, pay-per-view and video-on-demand channels o No limits on AM and FM radio stations o No limits on regular TV stations o No advertising on CBC radio networks except for programs that are available only on sponsored basis  Better Business Bureau (BBB)  Voluntary alliance of businesses whose members are committed to being fair and honest in their dealings, to promoting self-regulatory practices, to collecting and dispensing information to help businesses and consumers make sounds decisions  Advises organizations to establish and build positive reputation in market by honestly representing products and quickly respond to disputes in professional manner and in good faith  Canadian Marketing Association (CMA)  Backbone of marketing industry  Provides guidelines for its members through Code of Ethics and Standards of Practice  Mandatory for all members to abide by these policies  Marketers advised to become familiar with guidelines and restrictions that regulate marketing industry in Canada and look further afield to other countries o 3 important regulatory areas highlighted by CMA  Privacy  Personal information Protection and Electronic Documents Act (PIPEDA) provides businesses and individuals guidelines on what info can be collected, shared and distributed  Protects personal info and requires businesses to regularly review privacy policies, appoint privacy policy officer and collect only necessary info  Policy needs to be posted on websites and be honest, clear and regularly reviewed  Spam: the dissemination of unsolicited electronic messages to recipients that have not requested them  Canada’s anti-spam regulation in 2010/2011  Requires senders to identify self and organization they represent and send info only to those who re4quests  Revise legislation expected to make electronic spam software illegal  Contests  Marketers obtain legal advice and often use professional contest administrators when conducting contests to ensure complying with the law CHAPTER 3: CONSUMER BEHAVIOUR  Consumer behavior: actions a person takes when purchasing and using products and services  Market segmentations involve aggregating buyers into groups that have common need sand who are similar in terms of consumer behavior CONSUMER PURCHASE DECISION PROCESS  Businesses go through purchase decision process when considering products and services from suppliers  Purchase decision process: stages a buyer passes through when making choices about which products or services to buy o Problem recognition: perceiving a need  Occurs when person realizes difference between what he has and what he would like to have is big enough to actually do something about it  Advertisements or salespeople can activate consumer’s decision process by showing shortcomings of consumer’s product o Information search: seeking value  Consumers begin to search for info about what product or service might satisfy newly discovered need  Internal search: scanning memory for knowledge of or previous experiences with products/brands  External search: needed when one does not have past experience or knowledge, risk of making bad decision is high and level of interest in product is high  Primary source are personal sources, public sources and marketer-dominated sources (info from sellers such as advertising) o Alternative evaluation: assessing value  Consider all factors of the product  Consumer’s evaluative criteria represent objective attributes of brand and subjective  Firms try to identify and make most of both and create best value for consumers  Criteria often emphasized in advertisements  Criteria determine brands in evoked set-the group of brands that a consumer would consider acceptable among all brands in product class of which they’re aware o Purchase decision: buying value  Deciding when to buy is frequently determined by multiple factors  Use of internet may speed up process because easier to get info  Internet making it more convenient to purchase certain products/services online o Post-purchase behavior: value in consumption of use  After buying product, consumer compares expectations and is either satisfied or dissatisfied  Company’s sensitivity to a customer’s consumption experience affects value customer perceives after purchase  Studies show that satisfaction/dissatisfaction affects consumer communications and repeat- purchase behavior  Satisfied buyers tell 3 other people about experience  Dissatisfied buyers complain to 9 people  Internet allows buyers to complain and be heard by potentially thousands  “Sucks”- find negative stories about consumers’ experiences with products  Smart companies looking up into disgruntled customers and resolve problems  Some companies hiring employees to exclusively monitor sites and interact with unsatisfied customers right on site  Cognitive dissonance: feeling of post-purchase psychological tension or anxiety  To alleviate it, consumers attempt to applaud selves for making right choice  Firms often use ads or follow-up calls in post-purchase stage to assure buyer thy made right decision o Involvement and problem-solving variations  Involvement: person, social and economic significance of purchase to consumer  Sometimes consumers skip steps or minimize depending on level of involvement  High-involvement purchase occasions typically have at least 1 of 3 characteristics  Item is expensive  Bought infrequently  Could reflect one’s social image  Consumers engage in decision process extensively  Marketers who sell high-involvement products must understand info-gathering and evaluation process of consumers  Routine problem solving  Purchase process for items is virtually a habit and typifies low-involvement decision-making  Typically case for low-priced, frequently purchased products  Marketers strive to attract and maintain habitual buying behaviour by creating strong brand relationships with consumers  Limited problem solving  Characterized by low consumer involvement but significant perceived differences  Consumer may spend moderate about of time evaluating available brands in store  Consumers rely on past experience more than external info but pay attention to new varieties  Marketers should focus on getting consumers to shift to routine problem-solving by dominating shelf space and running ads to remind consumers of benefits of brand  Extended problem solving  Each of five stages in decision process used including considerable time and effort on external info search and identifying and evaluating alternatives  Several brands in evoked set and evaluated  Exists in high-involvement purchase situations  Influences on consumer purchase decision process  Socio-cultural influences  Situational influences  Marketing mix influences  Psychological influences SITUATIONAL INFLUENCES  Purchase task: reason for engaging in decision in first place o Info searching and evaluating alternatives may differ depending on whether purchase is gift (social visibility) or for buyer’s own use  Social surrounding: other people present when purchase decision made  Physical surroundings: décor, music and crowing in retail stores o Crowding may attract or turn away customers  Temporal effects: time of day/amount of time available  Antecedent states: consumer’s mood or amount of cash on hand PSYCHOLOGICAL INFLUENCES ON CONSUMER BEHAVIOUR  Motivation and personality o Both frequently used to describe why people do things and not others o Motivation: energizing force that stimulates behavior to satisfy need  Consumers needs are focus of marketing concept  Individual’s needs are boundless  Physiological needs for basics  Learned needs such as esteem, achievement and affection  Abraham Maslow developed theory characterized needs and arranged them into hierarchy  Physiological needs: basic to survival and must be satisfied first  Safety need: self-preservation and physical well-being  Social needs: love and friendship  Esteem needs: represented by need for achievement, status, prestige and self-respect  Self-actualization needs: personal fulfillment o Personality: person’s character traits that influence behavioural responses  Most identify key traits such as assertiveness, extraversion, compliance, dominance and aggression  Research suggests that compliant people prefer known brand names and use ore mouthwash and toilet soaps  Aggressive types use razors, apply more cologne and after shave lotions and purchase signature goods  Often revealed in person’s self-concept which is the way people see themselves and way they believe others see them  Marketers recognize people have actual self-concept and ideal self-concept  Actual self refers to how people actually see themselves  Ideal self is how people would like to see themselves  Perception: process by which someone selects, organizes and interprets info to create meaningful picture of the world o Selective perception: avg. consumer operates in complex, info-rich environment  Human brain organizes and interprets all info with selective perception which filters info so only some is understood/remembered or even available to conscious mind  Selective exposure: occurs when people pay attention to messages that are consistent with attitudes and beliefs and ignore messages that aren’t  Occurs often in post-purchase stage when consumers read advertisements for brand they just bought  Selective comprehension: involves interpreting info so its consistent with your attitudes and beliefs  Selective retention: consumers don’t remember all info they see, read or hear even minutes after exposure  Affects internal and external info search stage of purchase decision process o Perceived risk: anxiety felt when consumer cannot anticipate possible negative outcomes of a purchase  Affects info search step of purchase decision process: the greater the perceived risk, the more extensive the external search is likely to be  Greater the risk, the more extensive the external search likely to be  Strategies to make consumers feel more at ease  Obtaining seals of approval  Securing endorsements from influential people  Providing free trials of the product  Providing illustrations  Providing warranties and guarantees  Learning: behaviours that result from repeated experience or reasoning o Behavioural learning: process of developing automatic responses to type of situation built up through repeated exposure to it  Drive: need that moves an individual to action  Cue stimulus or symbol that one perceives  Response: action taken to satisfy drive  Reinforcement: reward o Negative reinforcement occurred: wheat consumer experiences upon responding to stimulus is not pleasant o Marketers use 2 concepts fro behavioural learning theory  Stimulus generalization: occurs when response brought about by one stimulus (cue) is generalized to another stimulus  Using same brand to launch new products is common  Stimulus discrimination: one’s ability to perceive differences among similar products  Consumers may easily with some groups of products  Low-involvement purchases: advertisers work to point out differences o Cognitive learning: making connections between two or more ideas or simply observing outcomes of others’ behaviours and adjusting own accordingly o Brand loyalty: favourable attitude toward and consistent purchase of a single brand over time  Learning important to marketers because relates to habit formation  Developing habits means consumer is solving problems routinely and consistently without much thought  Resulted from positive reinforcement  Values, beliefs and attitudes o Attitude formation:  Attitude: tendency to respond to something in a consistently favourable or unfavourable way  Shaped by values, beliefs which we develop in process of growing up  Marketers focus mostly on personal values  Personal values affect attitudes by influencing importance assigned to specific product attributes or features  Beliefs: consumer’s perceptions of how a product or brand performs  Based on personal experience, advertising and discussions with other people  Important because they create favourable or unfavourable attitude the consumer has toward certain products and services o Attitude change  Changing beliefs about the extent to which a brand has certain attributes  Changing perceived importance of attributes.  Adding new attributes to the product  Lifestyle o Way of living identified by activities (how people spend time and resources, interests (what they consider important in environment) and opinions (what they think of themselves and world around them) o Analysis of consumer lifestyles called psychographics produced insights into consumer behaviour  Most popular examples of psychographic analysis is VALS Program developed by SRI international  VALS program identifies 6 interconnected categories of adult lifestyles based on persons’s self-orientation and resources  Self-orientation describes patterns of attitudes an d activities that help a person reinforce his/her social self-image  3 patterns uncovered which are oriented toward principles, status and action  Persons’ resources range from minimal to abundant  Each category exhibits different buying behaviour and media preferences  VALS is American-based system and psychographics differ from Canadians  Millward Brown Goldfarm created psychographic groups based on extensive survey of Canadian values, ethics, opinions and interests over 3 years SOCIO-CULTURAL INFLUENCES ON CONSUMER BEHAVIOR  Personal influence o Opinion leadership  Opinion leader: individuals who have social influence over others  More likely to be important for products that provide form of self-expression  Small percentage of adults are opinion leaders  Identifying, reaching and influencing opinion leaders is major challenge for companies o Word of mouth: people influencing each other in personal conversations  Most powerful info source for consumer because typically involves friends or family who are viewed as trustworthy  Power of personal influence prompted firms to make efforts to increase positive and decrease negative word of mouth  Firms found supplying factual info, providing toll-free numbers for consumers o call company and give appropriate product demonstrations to be helpful  Costly and difficult to overcome negative word of mouth  Buzz marketing: brand becoming popular as result of people talking about it to friends and neighbours  Create buzz by hiring outside agency o Product seeding consists of hiring people to talk up a brand to others o Word of Mouth Marketing Association issued ethical guidelines on product seeding, including guideline that brand rep must always disclose relationship to brand when promoting to others  Power magnified by internet; online version of word of mouth is known as viral marketing  Reference Groups: group of people who influence a person’s attitudes, values and behaviour o Reference groups affect consumer purchases because they influence the info, attitudes and aspiration levels that help set consumer’s standards o Important influence on purchase of luxury products but not necessities  Exert strong influence on brand chosen when its use or consumption is highly visible to others o Membership group  One which person actually belongs  Easily identifiable and targeted by firms selling insurance, insignia product sand vacation packages o Aspiration group  One that person wishes to be member of or wishes to be identified with o Dissociative group  One person wishes to maintain distance form because of differences in value and behaviour  Family influence o Consumer socialization: process by which people acquire skills, knowledge and attitudes necessary to function as consumers  Children learn to purchase by interacting with adults in purchase situations and through own purchasing and product usage experiences  Research demonstrates that children show signs of brand preferences as early as two and preferences often last lifetime o Family life cycle: a family’s progression from formation to retirement with each phase bringing distinct needs and purchasing behaviours  Traditional family constitute over 41% of all Canadian households  Nearly 40% without children  Common-law couples with children only 8% of all households and without children 10%  Young single consumers’ buying preferences are for nondurable items such as prepared foods, clothing, personal care products and entertainment  Represent significant target market for recreational travel, automobile and consumer electronics firms  Young married couples without children more affluent than young singles because usually both are employed  Young marrieds with children driven by needs of children  Make up sizable market for life insurance  Single parents with children least financially secure because buying preferences affected by limited economic status  Middle-aged married couples with children typically better off financially than younger counterparts  Significant market for leisure products and home improvement items  Middle-aged couples without children typically have large amount of discretionary income  Couples buy better home furnishings, status automobiles and financial services  Persons in last 2 phases (older married and older unmarried) make up sizable market for prescription drugs etc. o Family decision-making  Spouse-dominant  Either husband or wife has more influence in purchase decision  Research shows wives tend to have most say when purchasing groceries, children’s toys, clothing and medicines  Husband more influential in home and car maintenance  Joint decision-making  Most decisions made by both husband and wife  Common for cars, vacations, houses, home appliances etc.  Increases with education of spouses  Five roles exist: information gatherer, influencer, decision maker, purchaser and user  Family members assume different roles for different products and services  Preteens and teens are information gatherers, influencers, decision makers and purchasers of products for family, given prevalence of working parents and single-parent households  Children and teens directly influence billions of dollars in annual family purchases  Culture and Subculture o Culture: a set of values, ideas and attitudes that are learned and shared among members of a group o Subcultures: subgroups within a larger culture that have unique values, ideas and attitudes o Most prominent types of subcultures are racial and ethnic  Each have unique buying patterns and socio-cultural behaviours o Canada’s outlook on ethnicity is that cultural and ethnic groups are welcome to continue with their traditions, languages and values  Diversity encourage o Canadians do not have a lot of native food, so country has been particularly welcoming of cuisine from around the world o Immigration influences food items and restaurants and many local happenings as a result of tradition or celebration brought here by some new- Canadians o French-Canadian Subculture  More than 9 million French-speaking Canadians in this country about 30% of population  Majority live in Quebec  Research shows French-speaking Quebecers do exhibit different consumption behaviour than rest of Canada  Quebecers more likely than other Canadians to say “enjoying life” and “seeking happiness”  More likely to believe that everybody should be free to do own thing than English Canadians  Quebecers more willing to pay higher prices for convenience and premium brands  French Quebecers are cautious about new products and often postpose trying something new until product proves itself  Express brand loyalty but will switch if given a special  Less likely to buy grocery items on impulse and increasingly calculating in food purchases  They like things that please the senses  Big buyers of lottery tickets  More likely to subscribe to book clubs  Make few long-distance phone calls  Travel less  More hold life insurance policies but less likely to have credit card o Tend to use services of credit unions (caisses populaires) rather than banks  Highest % of alcohol drinkers and most relaxed drinking laws, it has lowest % of excessive drinkers and fewest alcohol related problems  Some feel French Quebec can be characterized but changes are evident  While values are strong regarding family life and having children, use of birth control is rising and marriage rate is below national average  Commercial advertisement to children is prohibited and greater restrictions exist for alcohol advertising  Provincial regulations also require that labels and packages must be both English and French  Storefront signage must be French o Chinese-Canadian Subculture  Largest and fastest-growing visible minorities  Average Chinese household spends $63 400 a year  In general, they’re relatively young, educated and affluent  Tend to spend money on home furnishings, automobiles, kids’ education, high-tech gadgets, travelling and gifts  Like to do business within own communities and prefer media in their own language  Have preference for luxury vehicles  Tend to eat out at restaurants more than avg Canadian and significant growth of number of Chinese restaurants  Global Cultural Diversity o Canada’s approach referred to as mosaic meaning people who come to country from another are welcome to maintain their cultural identities and customs o Belief is that it’ll create situation where all Canadians can learn from rich variety of over 200 cultures that make up citizenry of country o Environment works to increase Canadian companies’ sensitivity and orientation toward other cultures, so transition to global activities and relationships is facilitated o Marketers must be sensitive to subcultures and appreciate cultural differences o Cross-cultural analysis: study of similarities and differences among consumers in two or more societies  Thorough cross-cultural analysis involves understanding of an appreciation for values, customs, symbols and language of other societies o Values: socially preferable modes of conduct or states of existence that tend to persist over time  Understanding and working with these aspects of society are important factors in global marketing o Customs: norms and expectations about the way people do things in a specific country or culture  Clearly customs can vary significantly from country to country  Custom of giving token business gifts is popular in many countries where they are expected and accepted  However, bribe, kickbacks and payoffs offered to entice someone to commit an illegal or improper act on behalf of the giver for economic gain and considered corrupt in most cultures  Organisation for Economic Co-operation and Development (OECD) an international body whose goal is to foster democratic government and a market-driven economy  Addresses issues of general interest to its members and affiliates  Corruption has become issue of major importance in past decade  Canada adopted OECD’s anticorruption convention and has made bribery of foreign public officials a criminal offence  French and Greece, bribes paid in foreign companies are tax—deductible expense o Cultural Symbols: objects, ideas or processes that represent particular group of people or society  Play important role in cross-cultural analysis because different cultures attach different meanings to things  By cleverly using cultural symbols, global marketers can tie positive symbolism to products and services to enhance attractiveness to consumers  Improper use can cause problems o Language  Global marketers should know not only basics of native tongues of countries they market their products and services but also subtleties and unique expressions of the language  Anthropologists estimate at least 3000 different languages actually spoken  11 official languages spoken in European Union  17 major languages spoken in India alone  English, French and Spanish are principal languages used in global diplomacy and commerce  Best language to communicate with consumers is own as any seasoned global marketer will agree  Global marketers use back translation  Back translation: retranslating a word or phrase back into the original language by a different interpreter to catch errors  Unintended translations can produce favourable results CHAPTER 6: SEGMENTATION, TARGETING AND POSITIONING MARKET SEGMENTATION  Market segmentation, target marketing and product positioning are interdependent  Essence of market segmentation, target markets, and product positioning is based on o Consumers diverse needs and single product cannot satisfy everyone o Finite amounts of money and it needs to be spent efficiently and effectively on consumers who are most likely to purchase the product o Marketers need to have clear consumer insights on target markets in terms of product needs, price expectations, purchase habits and communication tools to gather info, stay informed and be entertained  Marketing world has 2 main segments o Consumer market: consists of products. Ideas, and services that a person can purchase or support for personal use o Business market: products that are purchased either to run a business or to be used as a component in another product or service  Market segmentation: The aggregation of prospective buyers into groups that have common needs and respond similarly to marketing programs o Relatively homogeneous and consist of people who are similar in consumption behavior, attitudes and target market profiles  Product differentiation: involves positioning a produce apart from the competition in the eyes of consumers o Does not mean a product is better than another o Marketers position products as best they can to meet needs of target consumers o Sometimes may mean adding features or may mean minimizing all costs to provide cheaper alternative to market  Forms of market segmentation o Mass marketing: the marketing of a produce to the entire market with no differentiation at all  Exists in limited capacity today due to large amount of competition and need for marketers to specifically address consumer needs with offerings  Example propane gas can be business and a consumer product o Segment marketing: designing specific products and services to meet the needs of different target groups  Most common form  Segmented approach followed by companies in business-to-business market  Evident in food-service industry  Often segmented by needs of key accounts o Niche marketing: allows a company to focus its efforts on a limited segment in the market  Smaller firms adopt this approach to compete with large corporations that dominate category  Business-to-business market, this approach is followed by companies such as Stitt Feld Handy Group which provides services and training and dispute resolution to corporations, government bodies and agencies o Individual marketing: involves customizing offers and in some cases, products to fit individuals’ needs  Increased by new technology  Internet allows marketers to use database technology to track consumer purchases and predict interests and future purchases  Enables marketers to customize offers  Every customer is unique, has particular wants and needs and requires special care from the sell  In past made mass produced goods so affordable that most customers were will to compromise individual tastes and settle for standardized goods  Internet ordering and flexible manufacturing and marketing facilitated individualized market segmentations by making it easier to tailor goods and services to individuals  Key lies in finding the ideal balance between satisfying a customer’s individual needs and being able to do so profitably STEPS IN MARKET SEGMENTATION  Marketer needs to combine strong analytical skills, sound strategic thinking, an understanding of the consumer, a vision on where market is heading and how it all fits with company’s direction  Ten steps o Review strategic company objectives  Objects should be clear and quantifiable but also qualitative elements such as new business direction o Identify specific business unit objectives  Need to be in line with company’s strategic direction and outline specific sales, market share and profit targets for business unit o Identify consumer/customer needs and common characteristics in the market  Should be done from consumer perspective looking at what drives category and future trends are evolving  Marketers should be able to identify by analyzing what products currently exist in category, what’s expanding and shrinking and where consumer interests lie o Cluster common consumer/customer variables to create meaningful market segments  Need to stand back from market and look for clusters of products and gaps in market that point to common consumer interests, usage patterns and prevailing attitudes  New are should not be overlooked  Clusters will identify segments that exist  Sometimes overlap between segments or segments are not well-defined meaning consumers can be fickle and non-committal  Important to review market from consumer perspective and not product o Conduct SWOT analysis on the segments to determine strengths, weaknesses, opportunities and threats  SWOT analysis: Process by which a company can identify opportunities and whether it has the strength to compete in a segment that may already be w
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